Alberta fiscal update will include impact of oil price differential
A third quarter fiscal update will be given today, offering new information about Alberta's fiscal situation
The first peek at the financial books since the latest downturn in Alberta's economic recovery could offer some insight into how bad parts of 2018 were, and if better days are ahead.
Finance Minister Joe Ceci will give a fiscal update Wednesday for the first three quarters of the fiscal year ending in December 2018.
Ceci says the first part of 2018 came in with higher resource prices, before the "crisis" of the oil price differential set in.
"A harbinger of good news was Q2, and I think we can continue that," said Ceci, who declined to divulge what impact the lack of pipeline capacity, and oil glut had on provincial coffers at the end of 2018.
"You'll see everything."
Oil price gap
In his second-quarter financial update in November, Ceci predicted what he called a brewing crisis, as the gap between the price Alberta gets for its oil and the world price continued to grow.
At that time, the provincial deficit forecast for 2018-2019 sat at $7.5-billion — about $1.3 billion less than originally predicted.
The widening differential prompted the government to take the extraordinary move to restrict production output of Alberta oil.
It forced the largest 25 oil companies in the province to limit their oil production to help boost prices.
The curtailment did have the desired impact of increasing prices, causing the government to ease quotas in February.
In budget preparation telephone town halls held Feb. 6 and Feb. 7, Ceci told listeners the news in the financial update will be positive.
Ready for bad news
UCP leader Jason Kenney says he is bracing for bad news. He predicts a larger debt and a deficit that still isn't under control.
"Our big focus will be on their plan to get to a hundred billion dollars in debt," said Kenney.
"Their fiscal plan they ran on is a complete shambles," added Kenney who noted the NDP election platform of 2015 predicted a half billion dollar surplus in 2019, not a $8 billion deficit.
I think the big thing is going to be that the dip in revenue because of the price differential.- John Brennan, political analyst
Political analyst John Brennan also predicts the update will include a bit of bad news but believes it will be countered with an upward swing toward increased royalty revenue.
"I think the big thing is going to be the dip in revenue because of the price differential," said Brennan.
"But I expect that to be corrected by the next update because royalty revenue should have increased in the last couple of months with the increase in the price of Western Canadian Select."
Believing a new provincial budget will be introduced before the next election, Brennan, who spent years working with the federal Liberal government under Jean Chrétien, thinks it's tried and true formula to take to the polls.
'Nothing to lose'
"They've got nothing to lose," said Brennan.
"It's not going to be a bad news budget like the Prentice budget in 2015," said Brennan.
In 2015, then-premier Jim Prentice introduced a budget that increased taxes and cut services. Prentice called an early election running on the budget, but his Progressive Conservative government met with a historic loss to the NDP.
By contrast, the NDP isn't about to make that mistake, said Brennan.
"This will be an NDP budget. There'll be no increases in taxes. There'll be no health care premiums and there'll be slight increases for health education and post-secondary education."
The NDP has said it is preparing to introduce a spring budget but hasn't indicated when that will be.
The new session of the legislature begins March 18 with a speech from the throne.